Thank
you, Ken Duberstein, and thank you all very much. You know, if there's anything
I'll miss about this job, it's the warmup band.
Aren't they great? [Laughter]

Members
of the Cabinet and friends, each year we in the administration have gathered
here to review our progress and look forward to the work ahead. And today, in
keeping with that tradition, I want to talk to you about all that we've
achieved on the domestic front during our time in office and about some of the
unfinished business before the Nation.

I
can't help finding it hard to believe that this chapter in the American saga is
about to end. Yes, there are many things that I'll miss when I'm back at the
ranch. The courtly courtesy of Sam Donaldson [ABC News].
[Laughter] The your-wish-is-our-command helpfulness of
Congress. [Laughter] Yet as soon as I get home to California, I plan to lean back,
kick up my feet, and take a long nap. [Laughter] Now, come to think of it,
things won't be all that different after all. [Laughter]

But,
you know, I'll rest a whole lot easier knowing that I've left the White House
in good hands. There hasn't been a transition like this since Inauguration Day
in 1837, when Andrew Jackson turned the keys to the store over to Martin Van
Buren. And, no, I don't remember that day. [Laughter] When you get to be my
age, you don't remember anything that recent. [Laughter]

Now,
our critics on the other side and in the media say that the new President
doesn't have a mandate. But I just can't help wondering, if their candidate had
been the one to win by the second largest margin of any President running for a
first term in more than three decades, would they have said that he didn't have
a mandate? Have we ever had a clearer mandate? Strong judges, a strong defense,
and -- even people who can't read lips should have got this one by now -- no
new taxes!

Well,
yes, today, as in the past 8 years, it's true: We are the change, and this year
the American people shouted out loud and clear that they want the change to
continue. And I know that under President George Bush it will.

What
a change it's been. For what we've seen and been privileged to participate in
these last 8 years has been more than the victory of a program or the triumph
of a position on this issue or that. A force broader and deeper has moved in
our land, a force with the power and fury, the strength and grace, of a truth
whose time has come, a force that is rooted in the depths of this great and
noble experiment we call America: the force of freedom.

Yes,
we all know that what has been at stake during our time in Washington is the course of an ancient and enduring struggle, a struggle in
which we Americans have a special place. At its edges, this struggle is not so
much between good and evil, between absolute freedom and immediate slavery; but
between hope and despair, between those who shoulder the promise and the burden
of freedom and those who would -- in the name of a false determinism -- take us
a mile or two more down what Friedrich Hayek called the road to serfdom.
History records a few significant turning points in this epic struggle, and
surely in years to come it will tell that one of those turning points came
when, after a generation of gestation, a revolution of ideas became a
revolution of governance on January 20, 1981.

Now,
I know that you've often heard me recall the condition of the country, and particularly of the economy before we took
office: soaring interest and inflation rates, lagging productivity and
investment, falling real family income, growing poverty, and stalled economic
growth. But the most remarkable thing about that time -- as bad as things were
becoming -- was not the hardship, but the attitude of our leaders. Too many of
our leaders told us that America's troubles were the
fault of ``we, the American people,'' as if somehow we'd let our leaders down,
and not the other way around. They told us that we'd caught a disease called
``malaise.'' And then they turned around and told us that even if we reformed
there wasn't much we could do because great historic forces were at work, the
problems were all too complicated for solution, fate and history were against
us, and America was slipping into an
inevitable decline.

Well,
Whittaker Chambers once wrote that, in his words, ``Human societies, like human
beings, live by faith and die when faith dies.'' Well, there's a special faith
that has, from our earliest days, guided this sweet and blessed land. It was
proclaimed in the Declaration of Independence and enshrined in the
Constitution. It found a home in even our most remote frontier settlements, and
from every corner of the globe, it has drawn tens of millions of tempest-tossed
dreamers to our shores. Yes, it was what our founders meant when they inscribed
on our great seal the words that in translation say, ``A new order for the
ages.'' It is a faith in the wisdom and redeeming power of a free people. And
in saying that America has entered an
inevitable decline, our leaders of just a decade ago were confessing that, in
them, this faith had died.

Well,
that's when the American people rounded up a posse, swore in this old sheriff,
and sent us riding into town, where the previous administration had said the
Nation's problems were too complicated to manage. Well, we said of course they
are; so government should stop trying to manage them, stop putting its faith in
the false god of bureaucracy, and trust the genius of the American people
instead. Yes, we said, it's time to return to the principles of our founders:
the principles of the Constitution and the principles of limited government --
free enterprise and respect for family, community, and faith. And as a first
step, we said that the way to restore vitality to the economy was to cut marginal
tax rates and cut needless regulations.

We
did both. We cut the top tax rate in the 1981 tax act, and then we cut it again
in the 1986 tax reform. Our cuts in needless regulations have been at least as
significant; and as with tax cuts, other countries, including Japan, are
rushing to catch up. Of just one of these reforms, the streamlining of the Food
and Drug Administration review of new drugs to treat AIDS, cancer, and other
devastating diseases, the Wall Street Journal wrote almost 2 years ago, and I'm
quoting now: ``Among the initiatives of the Reagan administration, it will rank
with tax cuts and the Strategic Defense Initiative.''

Well,
you know the results of what we called in the 1980 campaign our economic
recovery program: the longest peacetime economic expansion on record -- almost
19 million new jobs created, real family income up
over 10 percent, poverty rate down, interest rates and inflation way down. In
fact, Milton Friedman has suggested that when improvements in product quality
are taken into account, underlying inflation may have disappeared altogether.

Meanwhile,
we're in the middle of the greatest boom in entrepreneurship in our history and
the greatest explosion of research and new technology in all of the entire
industrial revolution. This entire industrial revolution boosted productivity
-- or that original one did -- by a factor of a hundred. But according to
Carver Mead, the godfather of the semiconductor: ``The
microelectronic revolution has already enhanced productivity in
information-based technology by a factor of more than a million, and the end
isn't in sight yet.''

Today
America's reinvigorated
industries are exporting more than ever before. But that would never have
happened if, with the American people behind us, we hadn't kept domestic
protectionist forces at bay while we opened markets abroad -- another major
achievement. And with the coming implementation of the U.S.-Canada free trade
agreement, the century's third try at a free trade agreement between our
countries, and a new GATT round, we're taking giant steps toward a new era of
free and fair trade throughout the world and a new era of growth here at home.

World leaders have, in my presence, shaken their
heads in wonderment and spoken with awe of the ``American miracle.'' And you know that we're
doing something to the way people think when a Socialist Prime Minister of
Italy says in public, as happened a while back, that our policies are so
successful as to, in his words, ``make not only Italy but the whole of Europe
think.'' And then, echoing him, the chief economic spokesman of -- of all
things -- the Italian Communist Party added, and again I'm quoting: ``The old ideas of socialism are in crisis. It is the problem
of statism, a program that doesn't take into account
individual needs and values.'' I could have told them that
years ago.

Well,
here at home again, we worked with a bipartisan coalition in Congress to save a
faltering Social Security system from bankruptcy, to enact a pay-as-you-go plan
that helps free the elderly from financial consequences of catastrophic
illness, and to reform our welfare system. Our welfare system now includes
strengthened requirements that fathers help support their children and, for the
first time, work requirements for those able to work. At the same time, we've
prompted even bolder State experiments with welfare reform, as well as State
experiments with a bright ray of hope for America's poor: enterprise
zones. And we've begun to test selling public housing units to the tenants who
live in them.

Now,
not everything we did can or should be measured in dollars and cents. ``Justice
is the end of government,'' wrote de Tocqueville. He said we would appoint
judges who understood crime, criminals, and the Constitution; and we have. As
our judicial appointees have begun to fill the bench, Federal sentences have
grown a third longer than in 1980. And now on the Supreme Court and our appeals
courts, we have more and more Justices and judges who appreciate the hardships
of police work, who can see the distinction between the criminal and the victim
of crime, and who know the difference between making the law and interpreting
it.

And
talking about crime, I think it's a crime that one of the best men ever
nominated was kept off the United States Supreme Court: Robert Bork. But even
so, who knows, maybe in the next few years, the courts will even figure out
what the American people know: that the right to abortion is not in the
Constitution and the right to pray, including for schoolchildren to pray, is.

In
1982 I announced to the Nation that we were going to go after the mob like no
other administration in history. Within a few years, organized crime
convictions had quadrupled. Today we have the mob on the ropes. We're going to
keep them there. Yes, we launched a war on organized crime and on drugs.
Federal drug convictions have nearly tripled. Cocaine seizures are up 1,800
percent. And it seems as if almost every week, of late, brings news of another
international roundup of gangsters.

We've
put the Federal Government on the side of children and families, going after
child pornographers while working with Congress virtually to end Federal
funding of abortions. We've also issued regulations to ensure that no friendly [federally]
supported title X family planning program provides abortion counseling or
referral. And meanwhile, a certain lady I know has been teaching America's young people to just
say no to drugs. And more of them are than ever before. I can't tell you how
proud I am of Nancy.

But
in education, we've helped spark a nationwide grassroots movement to return
quality to our schools. State after State and school system after school system
have introduced reforms, from merit pay for teachers to getting back to basics
-- the four R's: readin', writin',
'rithmetic, and respect for the teacher -- and return
an appreciation of fundamental values to America's classrooms. For as Teddy
Roosevelt said, but too many seemed for too long to forget: ``To educate a man in mind, but not in morals, is to create a
menace to society.''

And
while our feet have been planted on the ground, our eyes have been turned
toward the stars. We have overcome tragedy and pushed forward on such visionary
projects as the space station and the space plane, even as we've cleared the
way for development of a private launch industry and for the commercial
development of space. I believe that the opening of space to the questing
dynamism of our free enterprise system may turn out to be among the most
significant developments in space exploration since the first landing on the
Moon. Combine that with the renaissance in private research that our economic
policies have spawned and our commitment to fields of research ranging from
AIDS-related studies of the immunological system to the superconducting
supercollider, and who can doubt that American technology will continue to set
the pace for the world in the generation ahead?

Yes,
from the economy to science and in every other field, we've followed the lead
of the American people these last 8 years and chosen hope. Like the American
people, we've chosen always to stand on the side of family and opportunity and
freedom. We have looked back to the kind of America our fathers intended,
and their wisdom has given us the strength, the balance, and the vision to look
forward.

But
as we look ahead, there is, of course, one area in particular where work is
still left to do: the budget. In 52 of the last 56 years, the House of
Representatives has been in the hands of the other party; and both Houses of
Congress for 46 of those 56 years. And in all but 8 of those years, the
Government has run a deficit. And under the Constitution, only Congress can
spend money; the President can't appropriate a penny. Even so, with Congress
dragged along kicking and screaming, we've made remarkable progress. We have
slowed the rate of growth in Federal spending to a third of what it was the
year before we took office. And we have transformed the debate on the budget; you
don't hear people argue anymore that deficits are good or that they don't
matter.

Still,
it's no secret that one of my great disappointments as I leave office is that
the Federal budget itself is not yet balanced. I've given our experience with
the budget a great deal of thought. And I would like to speak for a moment
about one of the principal lessons I have learned, a lesson that I believe that
has lasting importance.

It
sometimes seems to many Americans that what might be
called a triangle of institutions -- parts of Congress, the media, and special
interest groups -- is transforming and placing out of focus our constitutional
balance, particularly in the areas of spending and foreign policy. Some have
used the term ``iron triangle'' to describe something like what I'm talking
about, and with apologies to them, I'll borrow that term.

A
measure of this iron triangle's power derives from its permanence.
Administrations come and go, but the members of the iron triangle endure. Even
the body that the framers of our Constitution intended to be the most
vulnerable to shifts in public attitudes, the House of Representatives, has --
with a combination of gerrymandering, changes in campaign finance rules, and
the powers of the incumbency -- become a virtually permanent chamber, no longer
truly responsive to the people. With a 98-percent rate of reelection, there is less turnover in the House than in the Supreme Soviet, and a
seat in Congress is one of the most secure jobs in America.

But
the iron triangle's power also comes from its ability to focus debate and
overwhelming resources -- like campaign money and letter writing campaigns --
on issues that don't command broad and intense national attention. Yes, as I
said a moment ago, thanks to us, most liberals are now afraid to discuss new
spending. But go one step into greater detail, to the merits of this or that
restraint on spending, and the iron triangle has virtually shut off public
debate. Special interest groups focus all their resources and members on this
line or that in the budget. And Members of Congress, particularly liberal
Members, with their dependence on special interest campaign financing and their
fear of bucking any group that is strongly committed to a spending program,
take up the banner and join the charge.

It
helps the special interests that the Government spends a great deal of money
without Congress ever casting a vote. Now, I'm not talking here about Social
Security, but of the many formula spending programs. When we came to town,
bracket creep let Congress raise taxes without voting a tax increase. With
indexing and by beating down inflation, we stopped that. But the same thing has
not happened with formula spending. The result is that it's easier for most
Members of Congress to lay low and do nothing than to take the political heat
of voting for a change.

You'd
think the media might act as a check on all this, but too often it doesn't.
Now, let me say, no one who sits in my seat can have anything but the greatest
respect for the media and the role they play in our system. But it is also
clear that too many members of the media approach issues like Federal spending
from a superficial perspective. Our positions are reported in caricature.
Special interest charges are reported uncritically, and the public's
understanding suffers. Shouldn't we expect better of those who act in the name
of the public's right to know? [Applause]

What
we're talking about here is the very thing our Constitution was designed to
protect us against: a rise in the power of what Madison called factions. And I
believe the budget crisis would not be nearly so serious today had not the
Constitution itself been, in essence, rewritten nearly 15 years ago, upsetting
the calculus of consent within our system and opening the way for the situation
we now have.

I'm
speaking of the Budget Act of 1974. In a recent article in Commentary magazine,
legal commentator L. Gordon Crovitz wrote that the
act, in his words, ``was crafted by Congress to rob the President of the
ability to limit spending while making it possible for a fragmented collection
of Congressmen to spend and, at the same time, to evade responsibility for
doing so.''

Well,
as originally drafted, the 1974 act would have replaced the President's disciplining
role in the budget process with institutional disciplines within Congress. But
some complained that the proposed plan would, quoting a study paper of the
time, ``lock the congressional budget process into a conservative mold for
generations to come.'' Well, Congress fixed that and changed the plan. And
while, as I said, we've run deficits for most of the past five and a half
decades, the really big deficits started coming immediately after the act was
passed, and they've kept right on rolling ever since.

Can
you imagine a situation where any head of a company or head of a household is
forced to spend every dime? But that's the situation the President is in now.
If Congress appropriates it, the President has to spend it, whether he needs
all the money to do the job or not.

And
why do we have deficits? It's not because of a lack of revenues. Federal
revenues have grown by $375 billion since 1981. But spending has grown by $450
billion. And for the record, less than $140 billion of the spending increase
went to defense. Next year, we expect revenues to increase by another $80
billion without new taxes. So, the challenge before us is setting spending
priorities, deciding where to spend some of the additional revenue, but not
spending it all so we can reduce the deficit. Now, that shouldn't be so hard,
but history suggests that Congress will want to spend it all and then some.

When
I came to office, I found in the Presidency a weakened institution. I found a
Congress that was trying to transform our government into a quasi-parliamentary
system. And I found a Washington colony that -- through
the iron triangle -- was attempting to rule the Nation according to its
interests and desires more than the Nation's.

I've
used the President's ability to frame the broadest outlines of debate to
compensate for some of the weakening of the office. This year we also put an
end -- I hope for good -- to the use of monster continuing resolutions to make
the congressional budget veto-proof. But we have not restored the
constitutional balance, at least not fully, and I believe it must be restored.

In
the long run, the situation we have now isn't good for anyone -- even the
members of the iron triangle. Fundamentally, the American people know what's
up, and they don't like it. They may reelect their Congressmen, but they trust
Congress itself less and less. They may watch or read the media, but they stop
believing it. And they show more and more dislike for special interest
influence. The only question is: When will they say once and for all that
they've had enough?

The
strength of our nation has never been with the Washington colony but with the
American people. The budget deficit is the colony's last stand. In the last 8
years, we've taken giant steps toward shutting down their game of
tax-and-spend. We've succeeded as much as we have because even if the American
people can't follow every issue that has its day in this city, in the end they
know how the chips are falling. I believe that soon they'll be saying with
greater and greater force that it's time to restore our constitutional balance.
And I believe that they'll join us in saying that the place to start is with
enhanced rescission authority and a line-item veto for the President, with the
balanced budget amendment to the Constitution. Do that, and the Federal budget
deficit will be ancient history in no time.

As
we face the battle ahead, we'll find strength in remembering that we have
already fought great battles and won great victories. And we should never
forget how much those victories mean not only to America but to peoples
throughout the world. Writer George Gilder has said that we have ``launched a
global revival of capitalism.'' And, yes, the days are gone when, for example,
a British intellectual like historian A.J.P. Taylor could say that ``Nobody in
Europe believes in the American way of life, that is, private enterprise.''
Well, now, even in the Soviet Union and the People's Republic of China, our
example of private enterprise has an almost irresistible appeal.

But
our achievement is more than simply economic. In his memoirs of imprisonment in
the Soviet
Union,
NatanShcharanskiy tells of
how he was taken during a break in his trial to a special holding cell. Think
of the hopelessness of one who, despite his courage and conviction,
nevertheless knows that years in the gulag are ahead of him and his once normal
life is behind. And then in that moment his eyes lit on a scratching of
graffiti left by another prisoner of conscience, also a refusenik.
It said simply, ``Be strong and courageous,'' and it
was signed. And with that message from another man whose spirit was free though
his body was not, he found the strength to go on.

We're
free in body as well as spirit. But our success these last 8 years is also a
message of hope to those who yearn for freedom all over the world. We've put
the lie to the myth of determinism and despair, and reaffirmed that no force in
this world can match that of the robust spirit of free men and women. Political
philosopher Michael Novak has written that ``The major
division in American politics is not economic but moral.'' And so it is,
freedom and hope versus determinism and despair, and thanks to men and women
like you, the cause of hope and freedom is on the march.

And
now as I prepare to lay down the mantle of office, as I see how far we've come
and the transformations we've wrought, and I know who will take my place, I
cannot help believe that what Kipling said of another time and place is true
today for America: ``We are at the opening verse of the opening page of the
chapter of endless possibilities.''

Thank
you, and God bless you.

Note: The President
spoke at 11:20
a.m. at DAR Constitution
Hall. He was introduced by Kenneth M. Duberstein, Chief of Staff to the
President.